Looking ahead to 2018!

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Looking ahead to 2018!

Investors drove up stocks more than 20% in 2017. As we approach the end of the year it is natural for investors to turn their attention to 2018. With a 20% rise in stocks, Wall Street has become unquestionably bullish with some seeing the S&P reaching 3000. Markets are driven by all sorts of factors but at the end they follow their earnings. If corporate rate taxes come in anywhere near 20% then I believe the market will still have some upside. Although keep in mind so much of this has been priced in our current “Trump Bump”. Add to the fact large caps will get access to a couple trillion dollars parked off shore and the picture looks a little brighter. Question is what will they do with it? Too many CEO’s have been focusing on buybacks and driving up their own stock value. I feel they need to start growing the top line to stay competitive.

Things to look out for in 2018:

Flattening curve- US Treasury curves and spreads between long and short duration point to a flattening curve. Historically this points to an early warning sign of a recession. One thing to keep in mind is if the economy is as strong as the stock market suggests then why are some institutional investors locking up funds for decades accepting an annualized return of less than 3%?

Geopolitical hot spot- Every corner of the world has geopolitical hot spot and the world moves from one crisis to the next. So far we have all looked away. That will work as long as geopolitical threats don’t spill over into the real economy.

Bond market- after a decade of quantitative easing we are coming to the end of the greatest financial experiment in US history. US will go down the path to normal by beginning to unwind a $4.5 trillion balance sheet. The ECB and Japan will soon follow.

Bottom line is, be cognizant of your time horizons. Be clear on your goals/strategies and keep emotions in check. Keep this in mind, the total S&P annualized return from January 1, 2000 to November 30, 2017 is only 3.4%. Is taking all that risk for 3.4% worth it when there are many new non stock options available with a lot lower risk and higher possible returns? Remember things can change quickly and when you are at or near retirement, time in recovery can kill your financial well being and cause changes to your lifestyle.

Wishing you and your families a very Merry Christmas and a prosperous New Year! As always we are here to help guide you through your financial journey. Look for our brand new website in January of 2018. It will be full of great information and tools to help you stay up to date with all that’s happening in the financial world.

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